UPDATE 2-Puerto Rico residents sue power authority, allege fraud

NEW YORK Feb 24 (Reuters) - Local residents and businesses
sued Puerto Rico's Electric Power Authority (PREPA) in federal
court on Tuesday, alleging fraud in the fuel oil procurement
process that plaintiffs said resulted in island residents being
overcharged by more than $1 billion.

The lawsuit in U.S. District Court in Puerto Rico accuses
PREPA, one of the largest U.S. public utilities, of taking
kickbacks to accept millions of barrels of fuel oil from
suppliers that did not meet contract requirements or federal
environmental standards.

"As a result of this scheme, PREPA overpaid its fuel
suppliers for fuel oil and passed through the entire cost of the
non-compliant fuel oil to plaintiffs," the lawsuit alleged. The
lawsuit covers oil purchases since 2002.

PREPA said it had not received a court summons or a copy of
the lawsuit and could not comment on it.

The complaint alleges that PREPA and its suppliers colluded
with testing laboratories that issued certificates for compliant
fuel. It alleges that in one incident in October, 2010, a tank
of fuel delivered by Petrobras or Trafigura initially tested as
non-compliant, but was ultimately issued a certificate of
compliance after a retest following intervention from officials
acting for Petrobras and Trafigura.

Petrobras and Shell did not immediately respond to a request
for comment. Trafigura said it does not comment on legal
matters.
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